Proprietary and Risk premium: Difference between pages
From ACT Wiki
(Difference between pages)
imported>Doug Williamson (Add link.) |
imported>Doug Williamson (Add links.) |
||
Line 1: | Line 1: | ||
1. | 1. ''Financial reporting - fair valuation.'' | ||
For financial reporting and fair valuation purposes, risk premium is defined as additional compensation sought by rational risk-averse market participants for bearing the uncertainty inherent in the cash flows of an asset or a liability. | |||
This is a similar concept to market risk premium in the Capital asset pricing model. | |||
2. | 2. | ||
More broadly, value ascribed by any market participant to a reduction in uncertainty. | |||
This value would not necessarily be the same for all market participants. | |||
== See also == | == See also == | ||
* [[ | *[[Capital asset pricing model]] | ||
* [[ | *[[Fair value]] | ||
* [[ | *[[Hurdle rate]] | ||
* [[ | *[[IFRS 13]] | ||
* [[ | *[[Market participant]] | ||
*[[Market risk premium]] | |||
*[[Rational]] | |||
*[[Risk appetite]] | |||
*[[Risk averse]] | |||
*[[Risk free rate of return]] | |||
*[[Risk management]] | |||
[[Category:The_business_context]] | [[Category:The_business_context]] | ||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Risk_frameworks]] | |||
[[Category:Cash_management]] | |||
[[Category:Financial_products_and_markets]] | [[Category:Financial_products_and_markets]] | ||
[[Category:Liquidity_management]] |
Revision as of 12:46, 7 February 2021
1. Financial reporting - fair valuation.
For financial reporting and fair valuation purposes, risk premium is defined as additional compensation sought by rational risk-averse market participants for bearing the uncertainty inherent in the cash flows of an asset or a liability.
This is a similar concept to market risk premium in the Capital asset pricing model.
2.
More broadly, value ascribed by any market participant to a reduction in uncertainty.
This value would not necessarily be the same for all market participants.